If you are a long term investor, you tend to always make returns in equities. In fact, equity shares have known to outperform other asset classes in the long term. We have selected a few stocks that offer great opportunities for long term investors. These include stocks that have a very low debt to equity ratio and which have shown good growth over the years. These stocks have the tremendous potential to generate money in the long term.
Here are a few stocks that are from sectors such as pharma, auto and banking.
Sun Pharma is the nation's largest pharma company and the fourth largest in the United States. It has 41 manufacturing sites across the world, with a product portfolio totalling 2,000 and an employee strength of 30,000.
The company like most other pharma companies has been suffering from margin erosion in the US and of course US FDA issues. However, there are a number of initiatives that have been put in place by the company, which makes the stock a compelling buy at the current levels.
The most important of these initiatives is value addition or getting into special categories, which can boost margins. Here are a few of these that Sun Pharma has undertaken.
Why Sun Pharma stock is a great long term stock to own?
The company last year launched Bromsite, the first of its kind ophthalmology product in the United States. Sun Pharma has also acquired Dusa Pharma, US, which now gives the company access to patented drug-device combination useful for treating Actinic Keratosis, a dermatology ailment.
The company also acquired branded oncology product - Odomzo last year, which is approved in 30 countries across the world. Sun pharma also bought Ocular Technologies, which now gives access to global rights for Seciera - for treating Dry Eye Disease.
It has also in-licensed Tildrakizumab. All these speciality initiatives are likely to boost margins at a time when price erosion in the US is severe.
Financials and valuations of Sun Pharma
The early resolution to the Halol Plant would also be a key in the growth of Sun Pharma. FY 2017-18 is unlikely to be a great year for Sun Pharma. However, by 2019-20, we could see a remarkable improvement.
The stock of the company is currently available at a price of Rs 545, which discounts the 2018-19 EPS by about 23 times. If you get the stock a little lower at Rs 500, it maybe a good bet for the long term.
The stock of Yes Bank has fallen post its quarterly results for Sept 2017 after analysts questioned transparency at the bank and also the huge non performing divergence at the bank of Rs 6,355 crore.
Divergence refers to the bad loans difference between what the bank has shown and what is calculated by the RBI.
This is for the second time that time an RBI report, in its annual risk-based supervision, has observed divergences in both the banks' NPA reporting.
Not withstanding the negative news, Yes Bank remains a good stock for long term growth. The quarterly numbers reported were extremely strong. Net profit grew at 25 per cent, while the growth in the net interest income was a huge 33 per cent.
Advances at the bank too saw a rapid growth at 35 per cent. Check stock quote of Yes Bank here
Yes Bank Cheap on valuations as compared to peers
The price to book and p/e multiple of Yes Bank, is much cheaper when compared to peers like Kotak Mahindra, IndusInd Bank and HDFC Bank. However, the one reason for that is that the bank has larger exposure to corporates, which may have shrunk the valuations premium.
However, the bank is expected to continue to post robust growth in the months to come. The good thing is that the stock has fallen almost 20 per cent from its recent highs of Rs 380.
The stock is also trading at a price to book of just about 2.4 times, which makes the stock attractive at the current levels. The capital adequacy at around 17.8 times is also extremely good. The Yes Bank stock currently trades at Rs 306.
The one advantage for investors buying into Tata Motors is the fact that the stock has fallen from levels of Rs 598 to the current levels of Rs 404. In fact, the stock had dipped to as low as Rs 375 recently.
So, apart from the stock falling there are a number of other reasons to be buying the stock of Tata Motors.
The first is that the management has definite plans to cut cost and boost overall sales. The company already plans to make Tata Nano more profitable, apart from increasing the sales of commercial vehicles. In the past the company has lost share to Ashok Leyland in this segment.
Tata Motors also plans to change its complete manufacturing footprint to save on costs and make them more efficient. It also intends to stop using certain part facilities to bring down costs.
New launches will drive growth at Tata Motors
A spate of new launches will drive growth at Tata Motors and this is largely going to come from the JLR stable. The ramp up in the New Discovery and Velar will ensure sales rebound for Landrover, while the new production capacity in Slovakia is expected to meeting requirements in Europe.
Margins for JLR are expected to improve a good deal, which should push profitability higher in the coming months and days. Tata Motors is also expected to launch its electric vehicle I-Pace in 2018 & E-Pace later this year.
The margins of the company which took a hit for the quarter ending June 30, 2017 improves as forex losses reversed in the quarter ending Sept 30, 2017. In fact, the company reported a growth of 10 per cent in consolidated net revenue for Q2FY18 at Rs. 70,156 crores and a growth of 195% in consolidated net profits at Rs. 2,502 crores
By 2018-19 the company should report an EPS of Rs 44, which makes the stock very cheap a p/e of around 8 times. A good stock to buy for the long term. Check stock quote of Tata Motors here
Best small cap stocks to buy
In the past some small cap and mid cap stocks have given excellent returns. In fact, small cap stocks have beaten returns from large cap stocks, which have made them excellent bets for the long and short term. Please click on the link to see some excellent small cap stocks ideas.
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